The EBRD has lowered Egypt’s GDP growth forecast for 2025 to 4.2 percent and revised the fiscal year projection to 3.6 percent. Despite this, growth is anticipated to rebound to 4.7 percent in 2026, driven by improved investor confidence and key sectors like manufacturing. The inflation rate is easing, although high debt levels continue to pose fiscal challenges.
The European Bank for Reconstruction and Development (EBRD) has adjusted its economic forecast for Egypt, reducing the expected GDP growth for 2025 to 4.2 percent. This reflects a decrease of 0.3 percentage points from the previous estimate made in September. Furthermore, the EBRD has revised its projection for the fiscal year ending in June 2025, lowering it to 3.6 percent, which is a drop of 0.4 percentage points from earlier forecasts.
Despite the downward revisions, the EBRD remains optimistic about a recovery in 2026, predicting a GDP growth of 4.7 percent and 4.6 percent for the fiscal year 2025/2026. The bank cites improved investor confidence and the continuation of economic reforms as key factors contributing to this anticipated rebound. For the previous year, the EBRD estimated that Egypt’s economy grew by 2.9 percent, also marking a downgrade from prior projections.
The report emphasizes an uptick in economic activity during the first quarter of the fiscal year 2024/2025, following challenges of macroeconomic instability and currency fluctuations. Key growth sectors identified include communications, accommodation and food services, transportation and storage (excluding the Suez Canal), financial services, and manufacturing, which is exhibiting signs of recovery after a noticeable slowdown.
The EBRD also predicts a continuation of easing inflation rates, forecasting a decline in prices due to base effects and stringent monetary policies, notwithstanding possible adjustments to fuel prices. In January, the recorded inflation rate dropped to 24 percent, the lowest level since December 2022, showcasing positive trends.
While the Ras El Hekma agreement has reportedly bolstered Egypt’s external financial position, the EBRD has noted that economic vulnerabilities remain. The debt-to-GDP ratio is anticipated to decrease to 85 percent in FY2024/2025, down from 96 percent the prior year; however, significant debt-servicing costs persist. The EBRD estimates that between 50 to 60 percent of government expenditure in the current fiscal year will be allocated to debt payments, maintaining substantial fiscal pressure despite some gains.
In summary, the EBRD has revised Egypt’s GDP growth forecasts downward for 2025 while projecting a recovery in 2026. Key sectors are expected to drive growth amid easing inflation, although significant fiscal pressures from high debt levels remain. Overall, while there are signs of economic improvement, Egypt continues to face substantial challenges in the near term.
Original Source: www.egypttoday.com
